Thread: Day Trading
04-21-2008, 12:14 AM #1
Does anybody here have any knowledge or experience with day trading? I've decided thats something I'd like to get into after college, so I'm just looking for more information at the moment.
From what I've learned so far, its possible to trade on 4:1 margin without paying margin interest as long as you meet the guidelines of being a pattern day trader, and you sell all your positions by the end of the day. The algorithm I've devised so far, consists of starting with an initial investment of $30k, and then putting it all into one stock/option/etc. Each day, you pick a stock that looks to be on the rise, and putting your whole balance into it. If it goes up, you keep it for a few hours or until the end of the day, but if it starts going down you sell if before it can drop any more than half a percent or so. Then the next day, you just repeat the process.
Because you are trading on 4:1 margin, you would actually be starting out by trading $120k, so your gains/losses are four times as large. Because you are repeatedly trading in such a large volume, you are really only looking for small gains. As long as you sell any stock that is going south fairly quickly, and sell everything by the end of the day to avoid paying margin interest, you can get fairly significant growth, even by only making one trade per day.
I wrote a C++ program based on this algorithm that calculates projected earnings over a period of time based on random stock movements. Here's how it works:
1. You enter an initial capital.
2. The program randomly generates a true/false boolean. If it is true, the stock ended up increasing for the day, if it is false, the stock decreased.
3. The program calculates a random movement percentage for the position. If it is decreasing, the movement is between -0.01% and -0.5% (to simulate selling the stock if it is decreasing too much), and if it is increasing, it is between 0.01 and 1.25% percent (a typical amount for an average stock on a decent day. So each trade will randomly move within those boundaries.
4. The program then calculates the growth/loss for the day and adds/subtracts it from the initial value to get an updated total balance.
5. This is all repeated for 3 years (720 trades) and the results are displayed.
(if anyone is interested in the source code, just ask)
The way this algorithm is implemented, it simulates that the user is just picking one stock at random each day, putting the entire balance into it, and letting it go for the day, while selling it if it starts dropping a significant amount. There really is no skill involved, and it is fairly safe. The only way a significant amount of money can be lost is if you pick a bunch of extremely bad stocks all in a row (which is statistically not probable, even if you are picking blindly), or if your stock tanks upwards of 10% within a few minutes (which is also extremely improbable).
This method only has 1 requirement, which is that you must have ~$30k to begin, to offset any initial losses and broker fees, and to maintain a balance of over $25k which is mandatory for 4:1 margin day trading.
Because of the mathematics behind exponential growth and simple probability, this method can generate enormous profits, averaging around 100% growth every 4 months, and of course, the more you earn, the faster it grows. I was just wondering if anyone here has any experience with pattern day trading, and if there are any additional rules or restrictions that would interfere with this strategy.
Enter the intial capital: 30000 After 4 months: $47484.34 After 8 months: $88931.13 After 12 months: $158319.64 After 16 months: $290541.71 After 20 months: $450844.36 After 24 months: $803537.80 After 28 months: $1544650.17 After 32 months: $2480710.21 After 36 months: $4617863.28 Timescale is based on 240 trades per year. Trades over 25k were on 4:1 margin with a 20 dollar broker fee per trade. Each trade had a 50/50 chance of increasing or decreasing if increasing, each trade performed randomly between 0.01% and 1.25% if decreasing, each trade performed randomly bewteen -0.50% and -0.01%
04-21-2008, 04:56 AM #2
Re: Day Trading
Wow, you are like Rainman with social skills.
I don't know a lot about trading, but it seems risky to invest all your money into one stock.
I know you said that if the points started to drop even a little that you would just sell, but what if you can't sell any or all of the shares that you bought?
You seem to have quite a bit of knowledge about the situation and have clearly put a lot of thought into your strategy.
Good luck if you do decide to go for it.
If it works for ya, I'd like to get in on your systemRock out with your cock out!!!
04-21-2008, 05:11 AM #3
Re: Day Trading
...Because of the mathematics behind exponential growth and simple probability, this method can generate enormous profits, averaging around 100% growth every 4 months, and of course, the more you earn, the faster it grows. I was just wondering if anyone here has any experience with pattern day trading, and if there are any additional rules or restrictions that would interfere with this strategy....Get your facts first, and then you can distort them as much as you please. Mark Twain
04-21-2008, 05:31 AM #4
Re: Day Trading
I like to do all my trading at night on the sly. Plus there's less chance of being spotted by the cops when it's dark.
"If at first you don't succeed, parachuting is not for you"
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